Oct 05 2018
The video game and recorded music retailing industry has faced tough trading conditions over the past five years. The industry is declining rapidly, as sales of DVDs, CDs and PC games plummet. Industry revenue is expected to decline at an annualised 10.2% over the five years through 2015-16, to reach $1.2 billion. Physical sales of video and music products are being rapidly substituted for digital content sold by pure online retailers. Netflix, Steam and Spotify (which are part of the internet publishing and broadcasting industry) all provide access to vast libraries of media online and across a range of digital devices. Ongoing shifts in consumer preferences have meant that bulky physical products cannot compete with the level of convenience and the low prices of these digital services.
One ray of light for the industry is the sale of console games, which have resisted online substitution. Although PC game sales have been susceptible to substitution with digital content through platforms like Steam, this has been less prevalent with console games. The newest consoles (PS4 and Xbox One) provide online sales options, but the uptake has been limited compared with online music and video content sales. This trend is due to a difference in the culture surrounding console games, where users value owning a physical product that can be traded in later for a newer product, or lent to friends. The inability to access titles across a variety of devices also limits demand for digital console games, as one of the main benefits of other digital content is its transferability between devices. Another factor that has supported the sale of physical games is the limited storage space of consoles. This is a major drawback to online sales of console games, as console games purchased online must be stored on the machine’s hard drive and this limits the size of a consumer’s readily available collection.
These differences in culture and format have limited the efficacy of online sales compared with traditional console gaming retailing in regards to the CD, DVD and Blu-ray markets. Internet publishing and broadcasting revenue is expected to grow at an annualised 9.0% over the five years through 2015-16, to reach $1.7 billion. The resilience of physical games has meant that overall video game sales (both PC and console games) have declined at a far slower rate than CD and DVD sales. They have actually increased as a share of video game and recorded music industry revenue, to account for the majority of sales.
However, increased storage space on consoles, faster internet speeds with the rollout of the NBN and improved consumer familiarity with digital content is expected to gradually weaken console games’ resistance to online distribution over the next five years. Internet publishing and broadcasting revenue is expected to continue growing strongly, as are online video game sales, while video game and recorded music retailing will continue to decline.